Time to call time on British tax havens

10.43.00pm BST (GMT +0100) Mon 30th Mar 2009

The Government is losing billions of pound of tax revenue through some companies using British tax havens. The Liberal Democrats have today challenged the government over UK tax havens in a House of Lords debate.

Lord Wallace of Saltaire (Liberal Democrat deputy leader in the Lords) opened the debate, saying:

"Our prime concern as British politicians, and as Liberal Democrats, is with the massive loss of tax revenue to this country which the displacement of corporate and personal income to tax havens involves. A fair tax system requires loopholes to be closed: and tax havens provide massive loopholes."

Lord Wallace noted that not only are British tax payers losing out - developing countries are missing out on around $160 billion a year in corporate taxes as a result of worldwide tax havens.

Lord Wallace brought to the House's attention the fact that a dozen Offshore Financial Centres (OFCs) listed in a US tax evasion bill are British sovereign territories, and that the Government has actively encouraged these territories to develop their financial services industries to reduce their dependence on government subsidies.

Lord Wallace issued this call to the government:

"We therefore want some reassurance from the Government that they will be as vigorous in dispelling the secrecy of British offshore financial centres as of foreign ones; that they will now clarify the constitutional and oversight relationship we have with these semi-autonomous entities; and that they will ensure appropriate contributions to the UK Exchequer in return for the services received."

He concluded:

"The party should now be over for aggressive taxation avoidance and tax evasion under British sovereignty."

Lord Oakeshott of Seagrove Bay, Liberal Democrat Treasury Spokesperson, took up the attack on both the corporate culture of tax evasion and ineffective government regulation:

"Tax havens are sunny places for shady people. No one sends their money to Monaco or the Cayman Islands because they are centres of excellence for fund management...

"Why has the budget of HMRC's hard-pressed tax avoidance team ... been cut by 5 per cent from 6 April? Barclays will be laughing all the way to the Cayman Islands. Our taxmen are like fat policemen running after a speeding Ferrari; they need all the help that they can get."

Lord Oakeshott was particularly angry at Barclays, taking the opportunity to publicly reveal details of leaks that had been suppressed from national newspapers by a court gagging order. He detailed allegations of tax evasion on a massive scale by the division of Barclays Capital dedicated to "dodging the taxman".

He concluded with this appeal to the Prime Minister:

"Tax havens are a moral as well as an economic affront to Britain and to the whole civilised world-the unacceptable underside of capitalism. Our Prime Minister is a moral man, but he must now turn his words into deeds."

Lord Burnett added his support to this sentiment, proposing a 'purposive rule' for tax avoidance schemes, calling for far greater international co-operation in combating tax havens as well as further parliamentary debate to develop measures to stop tax evasion.

Winding up the debate for the Lib Dems, Lord Newby, Treasury spokesperson, endorsed Lord Burnett's call for a purposive rule and added a number of further recommendations for action:

"One would like to see shareholders asking more questions of the companies in which they invest. ... There should be a requirement that all non-doms who choose to remain in the UK for more than a set period should pay UK tax on all their global earnings, thus not just generating more tax income but closing another gigantic loophole. ... [And] We want to push for full information exchange agreements not just with our tax havens, as it were, but with those elsewhere in the world. We hope that that will be one of the outcomes of the G20 discussions."